CenturyLink's management shakeup reflects industrywide reassessment of cloud services

Sean BuckleyCenturyLink (NYSE: CTL) recently shook up cloud services management team, a sign that the telco is looking to retool this unit in the midst of strong competition from cloud giants like Amazon Web Services (NASDAQ: AMZN) and Google (NASDAQ: GOOG).

As part of that process, two of CenturyLink's cloud pioneers -- Jonathan King and Jared Wray -- have left the company. 

Forbes reported this morning that King is now going to lead Ericsson's (NASDAQ: ERIC) cloud strategy. 

King was a key figure in helping establish CenturyLink's cloud and data center business lines. Among his major accomplishments was participating in the acquisition of Savvis in 2011. Later, he led them to acquire other cloud-based companies, including Appfog, Tier 3 and Orchestrate.

Wray, CenturyLink's senior vice president of platform and application framework development, was a product of acquisition coming to the company when the telco purchased his startup Tier 3 in 2013.

CenturyLink assured FierceTelecom that the departure of King and Wray isn't an indication that the telco wants to exit the cloud business, but rather an effort to "flatten" its management structure.

All of the cloud services structure will now be overseen by CTO Aamir Hussain, who joined CenturyLink in 2014 as CTO. Hussain will oversee all of the cloud service functions and integration of the former Tier 3 and Savvis cloud technology organizations.

What these changes perhaps do illustrate on a higher level is the challenges that telcos have in facing off with larger cloud players. While CenturyLink has made progress in this segment, it lacks the dominance of Amazon Web Services, Microsoft and Google, which according to Synergy Research, enjoy a dominant cloud player status.   

In its recent third-quarter report, Synergy Research revealed that Amazon Web Services has a market share greater than 30 percent. Joining AWS are Microsoft (NASDAQ: MSFT) and Google, which saw third quarter revenue growth rates of 100 percent.

Then there's the data center business. CenturyLink's CEO Glen Post told investors during the third-quarter call that it is contemplating various options for its data center business -- one that it has grown organically across key markets in the United States, Europe and Asia. 

Among the options it is considering are a partnership or joint venture, a sale of all or a portion of the data centers, or keeping some or all of these assets and operations as part of CenturyLink's portfolio.

As of the end of the third quarter, CenturyLink had a total of 60 data centers across the United States, Europe and Asia. Over the past three years, the service provider has continued to expand its presence in all of these regions by either building out their own centers or through partnerships like it pursued in Australia with Data-Center-as-a-Service provider NEXTDC Limited, for example.

Post said that while it continues to see strong demand for colocation and managed services, CenturyLink could still offer such services without owning the data center assets outright.

"We believe we have the right strategy in combining our network service offerings with the delivery of managed IT and cloud-based services, and our enterprise customers are responding well to our managed services offerings," Post said. "We expect colocation services will continue to be a service our customers will look for us for, but we do not necessarily believe we have to own the data center assets to be effective in delivery of those services."

CenturyLink is not alone in its sentiment about operating data centers. Fellow ILEC Windstream recently sold off its data center business to TierPoint for $575 million. Similar to CenturyLink, the service provider will keep itself in the cloud game via an agreement with TierPoint to sell colocation and cloud services to their customers and its own.

John Dinsdale, chief analyst and research director at Synergy Research Group, told FierceTelecom that telcos are finding the data center and cloud business is a harder hill to climb than they initially thought.

"Being a successful large-scale data center operator needs ongoing investment and management attention. It is not a simple add-on to telecoms and networking product lines," Dinsdale said. "I think that realization is causing some reassessment among many telcos. Do they want to, and can they afford to make a big push on their data center operations so they can be competitive with the data center and cloud specialist operators? Or do they want to use more of a partnering and channel model to keep those activities live in their service offerings?"

CenturyLink, whose business has been to sell services over their traditional wired networks, may have brought the right tools together to be a cloud player realizes it has to retool its strategy to be successful.--Sean